Morning Economic News - January 8, 2009

Commentary and Overnight Trading

The biggest news Wednesday were the indicators of serious job losses in December with the ADP Employment Report showing more than 600,000 jobs lost in the US and the Conference Board reporting a drop of more than 12% in online help wanted ads. A key for investors to remember is that labor markets are generally a lagging indicator. After the last recession, serious job gains didn't really kick in until just before this recession officially started.

There was a fairly serious bit of positive news yesterday that was largely unreported. The Mortgage Bankers Association's weekly survey of mortage applications showed a double digit increase in new applications for purchases. The headline from the report said "Mortgage Applications Decrease" because there was a big decline in refinance applications, but it's purchase mortgages not refinances that drive the housing market. Now generally housing is also a lagging indicator, but in this case it was bad problems in housing that set the negative economic ride in motion, so stabilization in the housing market is key to general recovery.

Signals in overnight trading point to early losses Thursday morning to add to Wednesday's 3% drop in US stocks. US stock market futures are down about half a percent, while Asian stock markets are down 2 to 4%. Oil is down 1%. The dollar is up against the Canadian dollar, euro and pound, down 1% against the yen. [3:27 AM Eastern]

Economic News

Federal Open Market Committee (FOMC) Minutes - December 15-16, 2008

For most major industry groups, factory utilization rates declined
relative to their levels in July and remained below their long-run
averages. Available forward-looking indicators pointed to a significant
downturn in manufacturing output in coming months.

Weekly Mortgage Applications Survey - January 7, 2009

• Purchase Index: 344.2


• Change: Up 7.3%

ADP Employment Report - December 2008

• Total Nonfarm Private Employment: 113,160,000


• Monthly Change: Down 693,000

Help Wanted Online Data Series - December 2008

• Online Advertised Vacancies: 3,861,000


• Monthly Change: Down 507,000 (Not seasonally adjusted)

Time to talk oil glut?

US petroleum inventories have become exceptionally strong over the last
couple of weeks, with big increases this week in crude oil and major
refined product categories. With crude oil inventories above the
average range for the season and the major refined products all at
least in the upper half of their average ranges in absolute terms and
well above average in days of supply, it's reasonable to talk about a
supply glut in the US.

What I'm Reading

Commercial Property Loses Shelter

Delinquencies on mortgages for hotels, shopping malls and office buildings were sharply higher in the fourth quarter.

Deficit Projected to Hit $1.2 Trillion

The U.S. budget deficit will widen to $1.186 trillion for
the current fiscal year, the CBO said. It's an unprecedented number
that will likely only get bigger after Obama's economic-recovery
package.

Shirakawa Says BOJ Still Has Tools to Support Economy With Rates Near Zero Bank of Japan Governor Masaaki
Shirakawa said his policy board still has tools to support the
economy after lowering the key interest rate to 0.1 percent last
month.

Bank of England May Cut Rate to Record Low, Approaching Limits of Policy The Bank of England will probably cut
the benchmark interest rate to the lowest ever today as
officials move closer to the limits of conventional monetary
policy to fight the recession.

Germany's Exports Plummet by Record 10.6% as Global Recession Hurts Demand Exports from Germany dropped by a
record in November as the global recession curbed demand for
goods made in Europe’s largest economy.

Australia's Declining Exports, Home Building May Prompt Interest-Rate Cut Australian home-building approvals
fell by the most since 2002 and exports dropped for the first
time in nine months, stoking speculation the central bank will
extend the biggest round of interest-rate cuts in 17 years.

Paulson to `Find Out' How His $500 Million Fared During Tenure at Treasury Treasury Secretary Henry Paulson, a
$500 million man when he entered office, said he’s about to
discover how much of his fortune remains after two years of
financial market turmoil.

Nomura Forecasts South Korean Recession After Earlier Predicting Expansion Nomura International Ltd. said South
Korea’s economy will contract this year, reversing its earlier
forecast of an expansion, as exports and domestic demand weaken.

Banks in U.S. Begin Offering Fixed Mortgages Below 5% After Fed Steps In The largest U.S. banks are starting to
offer fixed home loans below 5 percent after the government began
buying mortgage securities to bolster the housing market.

Buy Japan Government Bonds on Prolonged Economic Slump, Principal Advises Investors should buy Japanese
government bonds on speculation growth in the world’s second-
largest economy will remain “a lot lower for a lot longer,”
according to Principal Global Investors.

Two-Year Swap Spread Shows `Healing' of Credit Markets: Chart of the Day Interest-rate derivatives are
signaling credit markets are returning to levels not seen in a
year as the Federal Reserve keeps its target lending rate pinned
near zero to unfreeze lending.